Created in 2004, EthiFinance ESG Ratings (formerly Gaïa Research) is the rating agency of the EthiFinance group, dedicated to small and medium-sized companies listed on the European stock markets.
EthiFinance ESG Ratings offers the following solutions:
- ESG (Environment, Social, Governance) ratings of more than 2,300 listed companies in Europe
- Monitoring of ESG controversies
- Involvement in controversial activities
- Contribution to the UN Sustainable Development Goals (SDGs)
- European Green Taxonomy
EthiFinance ESG Ratings offers, on a subscription basis, access to ESG (Environment, Social, Governance) data and scores on more than 2,300 listed companies in Europe, including nearly 400 in France. EthiFinance ESG Ratings specializes in ESG ratings of small and mid-caps and also covers French large caps.
For ESG assessments and reporting on specific non-listed portfolios (Private Equity, Real Assets, High Yield...), please see our OneTrack solution.
EthiFinance ESG Ratings assesses the companies it covers according to an ESG framework of approximately 120 criteria, divided into four pillars:
- External Stakeholders
In addition, through its various product lines, EthiFinance ESG Ratings covers all the PAI (principal adverse impacts) indicators required by the SFDR regulation.
EthiFinance ESG Ratings obtains a higher rate of information than its competitors on small and medium-sized companies thanks to its adapted analysis framework and its systematic dialogue phase. During this phase, which is central to the collection of data, all the companies covered can add information to the pre-filled questionnaire that is not included in their public documentation.
EthiFinance ESG Ratings updates its rating framework each year to take into account regulatory changes and to integrate emerging ESG issues.
EthiFinance ESG Ratings offers estimates of certain data - notably scopes 1, 2 and 3 of the carbon footprint - when they are not reported by the companies assessed.
In addition to access to the standard coverage of 2,300 companies, the EthiFinance ESG Ratings team can carry out ratings on request.
Examples of deliverables
ESG Controversies Monitoring
EthiFinance ESG Ratings offers a monthly ESG controversy monitoring service for more than 1,100 listed companies in the Eurozone.
This service includes the identification and analysis of controversies and related reputational, operational and legal risks. This assessment is based on research into the virality of controversies in the news and on social media using technology and an exclusive partnership with SESAMm, supplemented by a dedicated qualitative analysis.
EthiFinance's partnership with SESAMm, a company specializing in artificial intelligence and natural language processing, enables information to be screened in a way that is adapted to the size of the company. Relevant information is filtered and pre-qualified automatically.
EthiFinance's analysts then analyse the information in depth in order to organise it into controversies and qualify their level of severity for the company and its stakeholders.
EthiFinance ESG Ratings's controversies product also identifies companies that are not aligned or at risk with respect to recognised international standards, such as the United Nations Global Compact, the International Labour Organization's Fundamental Conventions or the OECD Guidelines for Multinational Enterprises.
This controversy monitoring service can also be deployed on other asset classes, upon request.
Example of deliverable
The deliverable contains the details of the evaluation of each controversy as well as an aggregated view of the performance of each company.
Controversial activities are activities that, for moral, social, health, ethical or environmental reasons, are subject to controversy (e.g., tobacco, alcohol, arms).
These controversial activities may involve violations of international human rights or environmental protection standards.
EthiFinance's methodological analysis focuses on the following controversial activities:
- Gambling and gaming
- Fossil fuels
- Defense and armament (including controversial armament)
The exposure levels for the European Small and Mid Caps are achieved through a qualitative verification of the companies' declared activities. For each of these activities, EthiFinance provides, for each company in its coverage, a level of involvement in 4 levels: minor (if less than 10% of the company's activity is controversial), limited (between 10% and 20%), significant (between 20% and 50%) and major (more than 50%).
Contribution to the Sustainable Development Goals
The United Nations Sustainable Development Goals (SDGs) were adopted in 2015 by 193 countries with a target date of 2030. Seventeen goals, broken down into 169 targets, were defined with the aim of mobilizing the international community through public and private actors to create a more sustainable society. They cover various issues related to sustainable development such as poverty eradication, gender equality, environmental protection, education, etc.
EthiFinance has developed a solution to help investors build tailor-made SRI products in a thematic investment approach through the SDGs. With this product, investors will be able to measure a company's alignment with the SDGs and report on various social and environmental impacts of their portfolios.
This offer has been tailored to take into account the specificities and challenges of listed SMEs.
A methodology to assess the contributions of a company to each fundamental issue of sustainable development through its products and/or services as well as its operations.
Assessing a company's contributions by considering both its operations and its products/services provide a complete picture of a company's impact. They can have a positive contribution through their products while having negative impacts through their operational practices.
Taking both approaches into account will help investors fight greenwashing and assess the impact of their investments in the context of the SDGs.
Example of deliverable
For each company, three measures of contributions to 16 SDGs are available, as well as a comparison with a benchmark composed of companies in the same sector and in the same revenue category.
How a healthcare company contributes to the United Nations Sustainable Development Goals.
Thanks to EthiFinance ESG Ratings, its nonfinancial rating agency specialized in ESG rating of listed European SMEs, EthiFinance can collect directly from companies their share of turnover, CapEx and OpEx eligible for and aligned with the EU Taxonomy. Since the implementation of the Taxonomy Regulation in 2021, this data has been updated annually and made available to the Group's investor clients at the end of the annual collection campaign.
In addition, EthiFinance developed an internal methodology to estimate the share of revenues, CapEx and OpEx eligible for the Taxonomy of companies that have not yet reported on these indicators. This data is available to investor clients and covers more than 2,300 listed European companies.
In addition to eligibility, EthiFinance has developed a methodology for estimating the potential alignment with the Taxonomy of the companies in its universe based on the criterion of a substantial contribution. This first estimation already allows us to identify, within our universe, nearly 180 companies with an alignment potential higher than 50% and about a hundred companies with an alignment potential between 10% and 50%. We consider that, in the spirit of the Taxonomy regulation, the analysis of externalities - the Do No Significant Harm (DNSH) criterion - can only be performed during a qualitative analysis.
Examples of deliverables
- Share of turnover, CapEx and OpEx eligible for and aligned with the Taxonomy as reported by 2300 European listed companies in Excel format
- Estimation of eligibility by quartiles and revenue bands of 2300 European listed companies in Excel format
- Estimation of the potential turnover aligned with the Taxonomy in Excel format
To learn more about our services related to the European Taxonomy, you can visit this page.
For carbon or biodiversity assessments, you can reach the Advisory division here.